With the price of gas hitting an all time record, talks of gas going to $8.00 a gallon, the global stock market is down, food prices are soaring, the housing market is weakening further, and over 80 million employees have lost their jobs so far this year and more on the way. A recession would affect us negatively. Since business may soon be tougher, it's critical for entrepreneurs to take steps to up-end any damage that could happen as a result of a recession. If energy prices press upward and the housing market continues to cave, businesses that rely on consumers' discretionary spending will likely face the greatest risk. There are some bright spots. Having a presence on the Internet, saves gas. Doing your business on the Internet, really saves gas.
Yesterday, I was playing the game of Cashflow with my 11 year old nephew. He loves this game and it won't be long before he'll actually be on his own making money. Sigh! They grow up so fast! It's fun to watch him get excited over increasing his cashflow. He's done very well with buying and selling houses and starting businesses. He's still struggling with stocks because it's paper and it doesn't increase his monthly cashflow unless the stocks go up. Just wait until he gets real life options. Lol. Since he's learned when to buy houses and when to sell houses, I'm sure he will learn to transfer that to stocks. I set him up an Internet practice account so he can watch the stock market and the forex market. There are ways of making money in the stock market and the forex market even in times like this, however, I advise you know what you are doing before you invest. In the words of Warren Buffet, "The number one rule in playing the stock market is don't lose money. Number two rule is never forget rule number one." I told him that if he did well, for his birthday I would put $100 in a real account for him and let him work with it with me. So he's real excited about it.
My 12 year niece is doing very well on it and plans to not use any of the money until she's old enough to buy a car and then just enough to buy the car. Back to my nephew, he even saw the advantage of paying off all his debt when he was able to based on the principles that I have talked here previously. Sometimes you don't realize they are watching you and learning. I didn't say anything about paying off debt yesterday and on his own, when he reached that point, he said, "I want to pay off all my debt now and that will increase my cashflow." Wow!
The secret to weathering a particularly nasty economy is to diversify your customer base, free up cash flow and cut costs where you can. Some business will flourish during a tough market. You could be one. Here are some steps for recession-proofing your business:
Cut costs. Have a look at your business and figure out where you could save. When times are tough, it's best to focus on core markets and spend money in those areas, not in areas that haven't been more profitable. When a recession hits, the last thing you'll want to do is get stuck with shelves of needless inventory. For a better idea of what you'll need as the year progresses, keep an eye on leading consumer indicators such as those offered by the National Retail Federation and the Conference Board. Also, establish inventory targets and make sure the sales and purchasing departments are talking.
Maintain prices. You may be tempted to slash prices to free up cash flow. That's a mistake. Sure, you'll sell products but you'll also cut your profit margins and likely dilute your brand in the process. Plus, if customers decide to buy again from you in the future they may expect similar discounts.
Reserve discounts. Since you don't want to dilute your brand's value and you especially don't want to start competing on price with discounters such as Wal-Mart Stores and Target, tread lightly when it comes to offering discounts. Be sure to reserve them only for current, repeat customers. You're trying to breed loyalty without diminishing your brand's value.
Focus on service. While expanding your business into markets abroad may be avenues for growth, many small-business owners should focus on their existing customers and clients for a boost in revenue. With this in mind, focus on service. It is one of the best ways to add value without costing money.
Invest in employees. When the going gets tough, the employees you have will be your productivity all-stars. Make boosting productivity, within reason, of course, a focal point. For those that rise to the top, be sure to reward them accordingly. You don't want to lose your most productive people at this time. Consider offering vacations or time off, which can be cheap incentives.
Free up cash flow. While you're attempting to cut costs and grow sales, now is the time to call in favors. Be sure to free up your business's cash flow by asking to have payments to suppliers extended. Also, if you have old debts, call them in. Having a good amount of cash on hand, especially in light of the credit crunch, will help you do everything from make payments to employees and vendors to spend on marketing campaigns that may grow future business. If you can pay off your debt, do so. Otherwise, use the plan that I have outlaid here previously and as your money increases, you are paying off your debt which will increase your cash flow. If your money increases and you have no debt, effectively you are making more and can weather the storm of a tough market.
Renegotiate contracts. If a contract, a lease or other obligation will soon be up for renewal, try to negotiate lower prices. If you don't need 50,000 square feet of office space, consider paring down. It is really a reality check that requires a tough look at your expenses.
Look to expand your business. If, on the other hand, you're sitting pretty give the competition a gander. Look for weaknesses and instability in your competition. If they've been having trouble, you may be in a good position to pick up their business at bargain-basement prices. Obviously, make sure you can afford it but their loss may be your gain.
You may be working from home or making money online as a business. Some of these ideas still apply. Look at each service or product that you do and make sure they are profitable to you. One lady, I talked with was in a MLM company where she had to pay $350 a month and was only making $50. If you're in a business for more than 60 days and it's not making a profit for you, then you're in the wrong business. Within 6o days, any online business should at least be clearing it's expense and hopefully making a little for you if you are truly working on the business. If you're not working on the business, why are you doing it? Now if you're buying a product with online shopping and you were buying a similar product offline, then all you've done is transfer expenses and that doesn't count. I'm talking about where you have to pay so much each month to be with an organization.
If you haven't started an online business, now is the time to start one. No obligation. I'll help you grow it and empower yourself to an executive income. Email me and I'll help you figure out where to start. E-mail me
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